Jaguar and Land Rover plunge to £200m loss

Ford's three upmarket UK brands - Jaguar, Land Rover and Aston Martin - have racked up losses of more than £200m, sending the US carmaker's European operations crashing into deficit.

Ford's three upmarket UK brands - Jaguar, Land Rover and Aston Martin - have racked up losses of more than £200m, sending the US carmaker's European operations crashing into deficit.

The Detroit-based car giant, led by chairman Bill Ford Jr, disclosed yesterday that its Premier Automotive Group, which consists of the three British marques and Volvo of Sweden, plunged to a loss of $362m in the second quarter compared with a profit of $166m in the same period last year.

The heavy losses came despite an increase in sales to $6.9bn, and are bound to fuel renewed speculation about Ford's UK brands, in particular Land Rover. The US company has been highly critical of quality levels at Land Rover's Solihull plant and has given management there until the end of next month to come up with a "road plan" for making radical improvements in vehicle reliability.

Ford blamed the sudden deterioration in PAG's performance on the weakness of the dollar - which hit Jaguar and Land Rover exports to America particularly hard - and fierce price competition in the US luxury car market generally.

The US carmaker said that the financial performance of Jaguar and Land Rover was also affected by the costs of introducing new models. Land Rover is about to launch a new version of the Discovery, known as the LR3 in the US, whilst Jaguar has introduced a diesel version of its S-type throughout the world.

Aston Martin also contributed to the losses although it makes only about 1,500 cars a year at its new Gaydon plant in the Midlands.

The only part of PAG which made a profit in the April-June period was Volvo, meaning that the loss sustained by the three UK brands was higher than the $362m reported for the division as a whole.

The loss at PAG left Ford's European operations nursing a pre-tax loss of $151m for the three months compared with a loss of $359m in 2003. Ford of Europe on its own made a pre-tax profit of $211m against a loss of $525m last year.

Adverse exchange rate movements accounted for just under half of PAG's losses for the period. Jaguar and Land Rover are heavily dependent on the US market. About 80 per cent of their combined production of 287,000 cars a year is exported and North America is their biggest market outside the UK.

At a meeting last month with Mark Fields, the new US head of Ford of Europe and PAG, Land-Rover was given until the end of August to set out its plans for improving product quality at Solihull. The plant has been told that Land Rover must be in the top five of the influential JD Power quality surveys within five years.

In the latest survey, published in May, Land Rover and Jaguar improved their performances by 20 per cent, but Land-Rover is still a long way from achieving a top-five place.

Ford has already decided that the next version of the Freelander will be built at Jaguar's Halewood plant on Merseyside, and there are fears that Solihull could close altogether.

Despite the impact of currencies, Jaguar is performing better, with sales of the Halewood-built X-type up 37 per cent in the first six months of the year following the introduction of a diesel version.